The term “Silver Tsunami,” often referred to as “empty nesters,” describes the impending wave of Baby Boomers—individuals born between 1946 and 1964—who are approaching retirement. This influential demographic makes up approximately 21% of the U.S. population, and as they age, their potential economic impact is significant.
Baby Boomers hold the highest level of wealth compared to other generations and are projected to transfer more than $100 trillion to younger generations over the next 20 years through inheritance. This financial handover, aptly dubbed the Great Wealth Transfer, is expected to include substantial assets from real estate. With 2024 on the horizon, the focus is on how this generation will navigate their home ownership.
According to Zillow, over 37% of homeowners across the United States are Baby Boomers, with the highest concentrations found along coastal regions. Notably, Virginia is home to several metro areas where Baby Boomers constitute significant portions of the homeowners. For example, reports from Construction Coverage show about 39% of Richmond’s Baby Boomer population are homeowners, making it one of the highest-ranking areas relative to others nationwide.
Yet the real estate market presents some challenges. Many areas experience what is termed oversupply of empty nest homes. Some experts speculate this could alleviate housing shortages, but others believe the opposite. Homes occupied by Baby Boomers, particularly empty nests, are often situated far from job opportunities, which appeals less to younger, potential first-time homebuyers.
Breaking down the numbers reveals intriguing trends: the percentage of Baby Boomer homeowners stands at 37.2% for Virginia Beach-Chesapeake-Norfolk and 33.9% for Washington-Arlington-Alexandria. Other nearby areas show similar figures—Charlottesville at 42.1%, Lynchburg at 41.3%, and Blacksburg-Christiansburg-Radford at 40.7%. This creates a complex situation where Baby Boomers who might want to sell are doing so not necessarily to decrease housing market pressure, but also fueled by personal choices about aging.
A survey conducted by Redfin found 78% of older American homeowners plan to stay in their homes as they age, which complicates matters. Many Baby Boomers, having secured extremely low mortgage rates during the pandemic, lack the incentive to relocate. Analysis indicates they are less likely to list their homes, which constrains the housing supply for younger generations. Surprisingly, millennials with children currently own only 14% of three-bedroom homes or larger across the U.S., whereas their empty-nest predecessors hold 28% of these properties.
The Silver Tsunami carries with it significant implications for the economy and housing. Given their preference to remain put, Baby Boomers who own their homes may also find themselves wanting to access the equity they have built without selling. Meanwhile, heirs of these homes could opt to sell after inheriting them, creating both opportunities and challenges within the housing market.
Many Baby Boomers may also wish to downsize to alleviate the financial burdens associated with maintaining larger homes as they enter retirement. Nonetheless, the dilemma many face is filled with practical decisions surrounding their living situations. Housing officials, developers, and planners need to anticipate the potential impact of this demographic's unique choices on future housing availability.
Addressing these trends proactively will be imperative to ensuring accessibility for all generations. While many Baby Boomers might decide to sell upon finding suitable alternatives such as assisted living, the majority seem inclined to retain their homes, which signals the importance of market adaptability if the rising demand from younger generations is to be accommodated.
Overall, the interplay between Baby Boomers and the housing market serves as a poignant reminder of the confluence between aging populations and economic shifts. Understanding and intervening appropriately can lay the groundwork for sustainable housing solutions for generations to come.